china's strong yuan strategy & gold bull, page-12

Who knows what China is doing or why?
Perhaps they are master strategists, or perhaps they are desperate and making sub-optimal allocations.

The theory that China is switching to a domestic consumer economy, and would benefit from cheaper commodities via a stronger yuan is not convincing. It would hurt their exports and I cant see that being an acceptable trade off. Did not work out that well for the US when they did it.

It certainly looks like they are building a huge Gold Position. It gives them a great deal of influence in the pricing, reminds me of the situation with other strategic resources.

Wether Gold is a strategic resource or not, remains to be seen. If it becomes a tier one asset, that would be an important validation. The reasons for China holding USD reserves and debt are not simple, they would not have enjoyed the growth they had if they had not been lending to the buyers.

If POG is inversely proportional to value of China's foreign reserves/debt then it is a realistic hedge that can be traded for strategic resources when dealing with other governments whom would also be interested in having such a hedge.

I imagine that certain African Politicians would find such an arrangement satisfactory - an ironic circle that the Sear would appreciate.

Would a lower POG increase distribution/consumption - think India
The Peak Gold hypothesis, though possibly nonsense, does look like a reasonable LT fundamental to consider.

Can Europe and US grow tax revenues faster than debt? Eventually, maybe, though the numbers do not look great, it all depends who is presenting them and how. Listening to Shadow stats and King News Broadcasts does not qualify one to dispense wisdom about Economics. But it is entertaining and not without some educational value.

If POG settled back to 1,500 - god forbid. It will be interesting to see how that would be reflected in the Share Prices of the newer Lower cost producers, assuming they are successful in reaching nameplate.

It would also be interesting to compare the cost of production relative to market price for a range of other commodities (I know gold is money), If average real cost of production is 800USD/oz and selling price was 1,600 then the factor would be 2, how does that compare historically with Copper and other coms?

To me, the plausible potential Blue Sky for POG is just a bonus reason for holding Low Cost producers. I would like to know the plausible floor price in POG also, as this will govern the risk of holding low cost producers. I suspect the risks are minimal indeed.

The price of Oil is also a major factor affecting cost of production, that must be considered.